China Deal Review: Fundraising back to normalised pace in April after record March

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After a record fundraising activity in March, private equity and venture capital deployment in Greater China returned to a more normalised tempo in April this year with total investments touching $5.6 billion, down 50.8% compared to the previous month.

Privately-held companies in Greater China raised over $11.4 billion in March, the month that saw a  recovery in deal-making after a two-month slowdown in fundraising activity this year.

Deal volume too reduced 25.1% to 149 deals in April compared to 199 transactions in the previous month this year, according to proprietary data compiled by DealStreetAsia. The financial terms of 13 deals remained undisclosed.

However, fundraising activity in April gained significantly over the same period in 2020 when privately held companies only collected close to $2.7 billion through 119 deals, largely due to a pandemic-induced market slowdown.

Megadeals decline; Early-stage startups shine

Megadeals, defined as transactions worth $100 million and more, still contributed to a sizeable chunk of the total financing in April. But their aggregate value narrowed in comparison with previous months, in another indication of the market cooling down.

The biggest deal in April was grocery app Dingdong Maicai‘s $700-million Series D round co-led by DST Global and Coatue Management. The fresh capital will add firepower to the startup’s market expansion and supply chain improvement plans amid the growing trend of consumers shopping for fresh vegetables online.

As the second-largest fundraiser in the month, Xingyun Group, which offers digital supply chain services to small and medium-sized merchants, collected about $600 million in a Series C2 round led by Alibaba’s Jack Ma-backed PE firm Yunfeng Capital.

The two $500-million plus deals, and 10 other megadeals of at least $100 million each, together amassed over $2.8 billion – just half of the total financing in the month. Previously, the percentage of financing garnered by megadeals hovered around 60-70% every month. It stood at 69.3% in March; 62.9% in February; and 69.7% in January.

Greater China, home to some of the world’s largest unicorns like Ant Group and ByteDance, remained the top destination for investors training sights on the “next big things.” As competition for entrance tickets to invest in well-known, growth-stage startups grows fiercer, investors are tilting more firepower towards early-stage opportunities.

Early-stage fundraisers, or startups at Series B rounds and earlier, largely outnumbered their growth- and late-stage counterparts in April. There were 74 deals at Series A stage and earlier, compared with 31 Series B deals; 18 Series C deals; seven Series D round deals; and only one deal at Series E stage and after. The funding stages of 18 deals were not disclosed.

There was also a preference for early-stage investments in terms of total financing into different funding stages in April. As the most well-funded stage, Series B rounds saw nearly $1.7 billion of capital inflows, or 29.4% of April’s overall investment scale, followed by deals at Series A rounds and before, with 19.6% of total financing at slightly over $1.1 billion.

Investors were generous in writing big-ticket cheques for early-stage deals, as six of the 12 megadeals in the month happened at Series B round and before.

The investors backed smart home fitness equipment developer FITURE; cloud-based robots maker CloudMinds; Beijing ZJS Express, a logistics startup backed by investors including Asia’s warehouse operator GLP; semiconductor firm InnoStar Semiconductor; artificial intelligence-based drug discovery platform StoneWise; and Gaussian Robotics, which delivers cleaning robots to corporate clients.

Software sector matures; Sequoia China steps up investments

Largely on account of Xingyun Group’s $600-million Series C2 round, the software sector surfaced as the most favoured industry in April in terms of deal value and count.

As an early sign that China’s software sector is maturing, startups in the field, which previously could hardly clock any megadeals, were able to attract more risk capital.

Although a dominant portion of software startups was still raising smaller investments of below $50 million, top fundraisers like NextData, an AI-powered risk control software also known as Shumei Technology, raked in $135 million in a Series D round. It was joined by other major fundraisers including AfterShip, a Hong Kong-based startup that offers shipment tracking solutions to the e-commerce sector; and robotic process automation firm Laiye, both of which completed a new round of at least $50 million in the month.

Companies that provide consumer products outperformed their biotech counterparts with the completion of 22 deals in April, equivalent to the total deal count in the software field. But when it comes to deal value, the combined financing into the capital-intensive, research-heavy biotech industry more than doubled that into startups in the consumer products sector, at $710 million, versus $290.5 million.

In the consumer products market, only CHICV, a cross-border e-commerce startup that sells apparel and accessories, managed to secure $50 million in a Series B round led by Tencent. In comparison, six biotech startups closed a funding round of at least $50 million, namely Abogen Biosciences; Kelun Biotech; Doer Biologics; Trinomab Biotech; Porton Biologics; EdiGene; and Bliss Biopharmaceutical.

Sequoia Capital China, the bellwether of early-stage tech investments in Greater China, participated in 15 deals worth an aggregate of almost $1.4 billion. The investor in top Chinese tech firms including Alibaba, JD.com, and ByteDance was founded in 2005 by former investment banker and entrepreneur Neil Shen, now one of the country’s best-known venture capitalists.

Sequoia China was said to be in the market raising at least 15 billion yuan for a new RMB-denominated fund, Reuters reported in September 2020, citing sources. The new fund, Sequoia China’s sixth, was expected to invest in its focused areas including industrial technology, healthcare, consumer, and media, according to the report.

Other notable PE-VC investment groups in April include Asia-focused PE powerhouse Hillhouse Capital and its VC arm GL Ventures; Matrix Partners China, the China team of US-based Matrix Partners; and others.

Expand Table

Most active investors in China's PE-VC market (Apr 2021)

Investment companyNo. of dealsTotal value of participated deals (USD)LeadNon-lead
Sequoia Capital China15$1,362 million510
Hillhouse Capital & GL Ventures14$572 million66
Matrix Partners China11$968.2 million56
Legend Capital & Legend Star8$138 million35
Cowin Capital7$95.5 million43
Tencent6$620 million33
IDG Capital6$224 million24
Shunwei Capital6$115 million33
CPE5$515 million14
If one deal is backed by only two investors, we consider neither of the two investors as a lead investor.

Expand Table

12 megadeals worth $100m and above (Apr 2021)

StartupHeadquarterInvestment Size (USD)Investment StageLead Investor(s)Investor(s)Industry/SectorVertical
Dingdong MaicaiShanghai$700 millionDDST Global, Coatue ManagementSequoia Capital China, Tiger Global Management, General Atlantic, China Media Capital, Ocean Link, Capital Today, Hony Capital, Aspex Management, 3W Fund Management, APlus Partners, Mass Ave Global, Cygnus EquityInternetE-commerce
Xingyun GroupShenzhen/Hangzhou$600 millionC2Yunfeng CapitalCrescent Point, Harvest Capital Management, 5Y Capital, Taikang Insurance Group, Matrix Partners ChinaSoftwareE-commerce
FITUREChengdu$300 millionBAll-Stars Investment, Legend Capital, DST Global, CoatueCPE, Sequoia Capital China, Tencent, C Ventures, Cygnus Equity, NIO Capital, GSR Ventures, BA Capital, Z1 Capital, Bertelsmann Asia Investments (BAI)Travel & LeisureFitness & Wellness
Arrail GroupBeijing$200 millionETemasek HoldingsOrbiMed, Ward Ferry, Hina Group, Industrial Bank, Mirae Asset.Healthcare SpecialistN/A
CloudMindsShanghai$153 millionB+Shanghai Chengtou Group, Guosheng GroupBusiness Support ServicesRobotics & Drones
Beijing ZJS ExpressBeijing$153 millionBSino-Ocean Capital, Ningbo Hanrun Investment, Gaolin CapitalLogistics & DistributionN/A
EDDA TechnologyShanghai, Suzhou, New Jersey$150 millionStrategic InvestmentSoftBank Vision Fund 2OrbiMed Healthcare Fund Management, 3W Partners FundMedical Devices & EquipmentHealthTech
NextData/Shumei TechnologyBeijing$135 millionDCPE, Matrix Partners China, Hopu Investment Management, Tencent, Xiang He CapitalSoftwareAI and Machine Learning
SoudianShenzhen$122 millionTwo funding roundsQianhai FOFCITIC Securities Investment, China SME Development Fund (Oriental Fortune Capital)Energy Storage & BatteriesE-commerce
InnoStar Semiconductor Shanghai$100 millionPre-AShanghai Alliance InvestmentNew Alliance Capital, Atlas Capital, KQ CapitalSemiconductorsN/A
StoneWiseBeijing$100 millionB, B+B: Legend Capital; B+: Lightspeed China Partners, Greater Bay Area Homeland Investments LimitedCDH Venture and Growth Capital (VGC), Eastern Bell Capital, GL Ventures, SIG, Long Hill Capital, Linear CapitalPharmaceuticalsHealthTech
Gaussian RoboticsShanghai$100 millionB+Meituan, Tencent, China Securities, Grand Flight Investment, BlueRun Ventures, Broad Vision FundsHardwareRobotics & Drones

Note: In our monthly analysis for April 2021, we have put together detailed charts of prominent deals, active investors, deal stages, and the most attractive sectors that have bagged the maximum venture dollars in the Greater China region.

Our database only considers deals officially announced by the related investee, investor(s), and/or financial advisor, while information based on market rumours and news reports citing sources is excluded.

For a more detailed analysis, and to enable comparison between primary and secondary markets, DealStreetAsia has started tracking deals of all sizes since April 2020, as against considering only transactions worth more than $10 million earlier.

We have also introduced a standardised system for industry classification. It currently includes over 50 industries, as well as over 45 new economy and high-tech verticals, which will progressively increase to adapt to local market conditions in our closely watched regions of Greater China, Southeast Asia, and India.

Liya Su contributed to the story.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.